On business.

Dairy Products Businessman Not Cowed By Big Debt

Michael Smolyansky feels he is ready to move into high gear after having built a dairy products business in the U.S. over the last decade since he immigrated from the former Soviet Union.

"The sky's the limit," enthuses the president and CEO of Lifeway Foods Inc.

Lifeway is preparing to start operations next month in a 46,000-square-foot plant located just a mile from its headquarters and much smaller production facility in Skokie.

Smolyansky says the firm has spent about $1.5 million to equip the new plant, which will "easily allow us to increase production 10 times from what we're doing now." Saying he doesn't like debt, the Ukraine native says Lifeway already has paid off 40 percent of the $1.3 million it borrowed to buy the new facility last fall.

Lifeway produces kefir, a fermented dairy drink popular in eastern Europe, along with drinkable yogurt and farmer's cheese. Smolyansky says it plans to resume production of a fat-free cheesecake which it test-marketed several years ago.

But the biggest venture planned for the new facility, he says, will be to produce a new kefir pumped up with an additive said to improve nutrition and combat certain gastrointestinal ailments.

The substance, called colostrum, was developed by GalaGen Inc., a Minneapolis biopharmaceutical firm spun off in 1992 by Land O'Lakes Inc., a giant dairy products firm. GalaGen went public in 1996 and Land O'Lakes owns 16 percent of its stock.

Dr. Robert Hoerr, GalaGen's president, says the substance contains antibodies that exist in cow's milk only during the first four days after a calf is born.

"Kefir, which is a cultured dairy product, also contains ingredients with a long history of perceived health benefits," he says.

GalaGen will supply the substance to Lifeway under a joint venture agreement. Smolyansky says his firm plans to begin test-marketing the enhanced product within the next few months in health food stores.

Both executives say the additive doesn't require government approval because no health claims will be made. It will be listed on the bottle label just as the nutritional ingredients that appear on cereal boxes.

Bearing fruit: Fruit of the Loom Inc. chairman William Farley stood in the dark during most of Tuesday's annual shareholder meeting Tuesday as he narrated a slide show concerning the firm's financial situation and business plans.

A spokesman later apologized for forgetting to turn on the light over his rostrum.

But Farley brightened considerably after the meeting. "If business continues the way it's going, we should have a record year in 1997," he told reporters.

Standard & Poor's Corp. followed by raising its outlook for the Chicago-based apparel-maker to stable from negative and reaffirming its credit rating.

Fruit earned $151.2 million in 1996 after losing $232.5 million in 1995. Its record was set in 1993 when it earned $212.8 million.

Until recently, the firm was primarily a maker of men's underwear. A joke around the firm, Farley said, was that it changed Henry Ford's famous dictum to "we offer any color as long as it's white."

The firm is now diversifying heavily into fields like Gitano denims, casual wear for men, women and children, and apparel carrying licensed professional sports and cartoon logos.

It's also moving most of its sewing and cutting operations to countries such as Honduras, El Salvador, Ireland, Morocco and, soon, Abu Dhabi. By the end of 1998, Farley said, about 80 percent will be done offshore compared with 44 percent in 1994. But most of its textile manufacturing, he added, will remain in this country.

A footnote: A stockholder proposal to eliminate a stockholder rights plan, commonly known as a poison pill, drew 45.9 percent of the votes cast. Directors adopted the rights plan in March 1996 without shareholder approval.

Stocks down under: Catalyst Institute, a Chicago think tank, is doing a study to determine if the creation of a Nasdaq-like over-the-counter market would be feasible in Australia for small and medium-sized publicly traded companies.

The study, which was commissioned by the Australian Department of Industry, Science & Tourism, is to be completed next month.

"There virtually is no OTC market in Australia because of regulatory restraints," says Catalyst president Paul R. Knapp. "Brokers can't also serve as market makers. Some smaller companies are listed on the Australian Stock Exchange, but they get very little trading."